Law and Information

I have the pleasure to participate in a terrific conference on “Regulating Search?” organized and hosted by our friends at the Information Society Project at Yale Law School. Here is my first discussion paper. I will post a second one later on:

Regulating Search?
Sketching a Normative Framework for Assessing Regulatory Proposals

1. The question of this symposium – Regulating Search? – can be approached from various angles and at different levels. In any event, one might expect, inter alia, that several proposals of legal and/or regulatory actions aimed at regulating search engines, ranging from consumer protection laws, IP reform, etc., will be up for discussion. Presumably, the respective proposals will pursue different policy goals and use different regulatory techniques.

2. In a later phase, proposals like this are likely to enter into competition with one another. Lawmaking and regulation are costly processes, requiring that choices about goals and means be made. Against this backdrop, a systematic comparison and isolated evaluations of regulatory proposals become essential in order to make well-informed and sustainable decisions. A look back at the history of what has been termed “cyberlaw,” however, reveals a prevalent lack of thorough assessment of legislative and/or regulatory actions, in part because such an assessment requires an open discussion and shared understanding of what fundamental policy objectives should underlie today’s information society in the first place. This failure should not be repeated in the future and with regard to a potential regulation of “search.”

3. I would like to suggest three core values (or policy goals) of a democratic information ecosystem that may serve as the benchmarks for assessing proposals aimed at regulating search engines in particular and search more generally: Autonomy, diversity, and quality. Informational autonomy includes at least three elements. First, an individual must have the freedom to make choices among alternative sets of information, ideas, opinions, and the like. This includes the freedom to decide what information someone wants to receive and process. Second, informational autonomy as an aspect of individual liberty necessitates that everyone has the right to express her own beliefs and opinions. Third, autonomy in the digitally networked environment arguably requires that every user can participate in the creation of information, knowledge, and entertainment.

4. The development of an individual’s own personality and self-fulfillment intersects with a second core value of the digitally networked ecosystem: its diversity. Diversity in the sense of a wide distribution of information from a great variety of competing sources can either be seen as a valuable mechanism to attain truth, or as a crucial instrument for protecting democratic process and deliberation. In the digital environment, however, the diversity of information, knowledge, and entertainment is an important aspect of the broader concept of cultural diversity.

5. As individuals, groups, and societies, we heavily depend in our decision-making processes on information, which is increasingly acquired over the Internet. In order to make good decisions, we depend on quality information, i.e., information that meets the functional, cognitive, aesthetic, and ethical requirements of different stakeholders such as users, creators, experts, and administrators. Consequently, legal and regulatory regimes should contribute to the creation and further development of a high-quality information ecosystem.

6. Each proposal that seeks to regulate search in general and search engines in particular can be evaluated based on these normative criteria. Even with this normative framework in place, however, the assessment of alternative governance regimes gets complicated, since the three policy goals “autonomy,” “diversity,” and “quality” are not necessarily always aligned. Unleashed diversity in the digitally networked environment, for instance, might have negative feedback effects on user autonomy because it increases an individual’s risk to be exposed to undesired information. A regulatory approach aimed at ensuring high-quality information, by contrast, might be in tension with informational autonomy, because it may impose a quality requirement leading to a level of quality that does not meet an individual’s informational needs.

7. As a consequence, governance proposals for search engines and their environments face the challenge of achieving a balance among three policy goals that are not perfectly aligned. In the case of search engine regulation, this problem is accentuated by the fact that search engines simultaneously affect all three aspects. For example, since search engine users often do not know in advance what specific piece of information they are looking for, the quality of the information that users get depends to a great extent on search engines. Consequently, the quality of information is intertwined with the quality of the search engine that defines which information becomes available based on any given query. Similarly, search engines have effects on autonomy and diversity in the digitally networked environment. Against this backdrop, regulation of search (engines) is a particularly complex task because each regulatory intervention focusing on one issue almost certainly affects another element of the normative framework.

8. In conclusion, this discussion paper calls not only for a careful design of legal or regulatory actions aimed at governing “search,” but also for a thorough assessment of legislative and/or regulatory proposals and their potential effects against the backdrop of core values of a democratic digital environment (system of “moving elements”). In that sense, the paper also advocates for a systemic view of “search” regulation, where “search” is understood as one element that interacts with other elements of the digitally networked environment, including decentralized content production and peer-to-peer distribution of digital content.

Comments welcome.

For the fifth time within two months I’m finding myself back in Cambridge, Mass. You can’t imagine how much I love this place. There are many reasons why I think Cambridge is among the most exciting and inspiring places to be. One reason, of course, are the many wonderful friends and colleagues that have been working and living here. Take as one prominent example my brilliant colleague Derek Slater, Fellow at the Berkman Cente and EFF affiliate with whom I had the pleasure to work on a couple of projects. He has just posted two interesting podcasts on his blog. In the first piece, Derek reports about the P2P litigation summit he participated in, arguing that we have to learn more about – and from! – the stories of the people that got sued by the recording industry. In the second podcast, Derek provides a big-picture analysis of possible (technological, business, and policy) approaches to the file-sharing problem. In essence, he makes a strong case why policy-makers should not take drastic measures (such as, e.g., compulsory licensing systems or, as the worst-case scenario, mandatory DRM schemes) to address the current digital media crises. Rather, policy-makers may be well advised to trust in the evolutionary power of market mechanisms on the one hand (emerging business models, in fact, might address the problem) and to focus on the reform of the DMCA and certain procedural protection measures on the other hand.

Natali Helberger, Institute for Information Law, University of Amsterdam, has written yet another good piece on Digital Rights Management from a Consumer’s Perspective.

Back at the Berkman Center, I’ve been preparing for State of Play III, where I will be participating in a workshop entitled “Building the Metaverse: The Role of Property, Intellectual Property and Commerce.” It turns out that the workshop agenda, circulated in the last-minute, develops in a different direction than I expected, but anyway, here are some pre-conference thoughts (thanks to my friend and colleague James Thurman for research assistance):

1. Virtual worlds were originally considered to be communities of fantasy, but today equally constitute communities of interest, relationship, and transactions. Indeed, virtual worlds have developed their own economies with production, assets, and trade activities comparable to national economies in the offline world. At the core of virtual economies are marketplaces for virtual world goods, where citizens/users are increasingly engaged in creating, providing, and demanding digital items. Depending on the virtual world, between 20% and 70% of citizens/users are estimated to be engaged in smaller and larger transactions of this sort.

2. The first online games that provided an immersive experience and created a persistent environment as is now characteristic for virtual worlds debuted in the second half of the 1990s. It is noteworthy that first-generation virtual worlds such as Meridian 59 already enabled transactions—besides being based on killing and adventuring. However, transactions in this stage of technological evolution were rather simple and straightforward: Avatars had the ability to deal with computer-commanded merchants who bought and sold virtual items. Those items could then be further traded between avatars within the game.

3. More recently designed social virtual spaces are centered around creation, development, exploration, and engaging in transactions as opposed to simple “hack and slash” or playing out an overall adventure or storyline. EVE Online, for instance, enables users not only to buy and sell virtual items, but also to create and operate virtual businesses, to manufacture digital items, provide services, etc. In second-generation virtual worlds, in-game transactions have both increased in importance as well as gained in complexity. In addition, the locus of the marketplace on which digital items are traded has blurred: In many cases, large-scale in-game trades simultaneously take place with economically significant trades over platforms such as ItemBay or eBay.

4. The increased participation of users in the creation of virtual world items in second-generation worlds marks the transition from a hierarchical and centralized paradigm of production to a decentralized mode of peer-production of virtual worlds. In emerging third-generation virtual worlds such as Second Life, users are no longer engaged in the production and trade of particular virtual items aimed at eliminating scarcity in the economic sense, but become co-creators of the virtual world as such. Against this backdrop, transactions in virtual items are not only of economic relevance, but will increasingly become “part of the game” in the (different) sense that they are constitutive elements of virtual worlds.

5. Each of the three stages of market evolution as outlined above is associated with a distinct set of legal/regulatory problems and governance challenges. In first-generation games, the complexity of such problems is fairly limited due to the limited number of transactions and types of transaction that constitute the in-world marketplace. Governance problems in this phase may include phenomena such as digital looting or cheating. Second-generation virtual worlds, by contrast, increase the level of complexity of transactions dramatically by enabling users to become more creative and more interactive. As a consequence, virtual worlds of this generation are facing a series of legal/regulatory challenges, ranging from the question of ownership of digital property to disputes between market participants or fraud. In third-generation virtual worlds, these governance issues get even more important and complex due to ubiquitous creation and exchange of digital items as building blocks of the virtual world. The associated re-allocation of the roles of platform providers on the one hand and users on the other hand may ultimately result in many-faceted tussles over control, both vertically (between platform providers and users) and horizontally (between users and/or group of users.)

6. A tentative and non-comprehensive analysis of the governance regimes of several online worlds across the three generations suggests that the regulatory problems and challenges mentioned above have mainly been addressed by using two modes of regulation: Code and law. (NB: It appears that alternative regulatory mechanisms such as reputation systems prove less successful in this part of cyberspace than in others.) Code, of course, seems to be the first choice to regulate behavior on the marketplaces of virtual worlds. However, an initial analysis suggests that code, in this particular case, has much more an enabling function than a constraining function based on users’ demand to be able to do more things (including transactions) in virtual worlds. Further, code is limited to in-game regulation. Where problems occur at the intersection of virtual worlds and other worlds, code-based regulation seems to be much less effective. Finally, code can be and has been circumvented.

7. Law as a mode of regulation has mainly been applied in form of End User Licensing Agreements (EULAs) and Terms of Service (ToS). Most of the first-generation-virtual-worlds EULAs, as far as we can see, have not set forth specific governance regimes aimed at regulating transactions; rather, they look similar to general software licenses. Given the characteristics of these transactions and the low conflict potential at the early stage of development, this does not come as a surprise. The EULAs of second-generation virtual worlds commonly address (if not necessarily resolve) some of the conflicts outline above. The question of content ownership and copyright as the basis for virtual commercial transactions has got a fair amount of attention in EULAs. Overall, a notable feature of many second-generation EULAs is that they seek to establish control and possession over all of the content which appears upon their platforms. Further, many of the EULAs or ToS contain provisions which explicitly restrict the real world sale of digital items or avatars. However, it does not appear that such activities have ceased concerning those games which prohibit them. Some EULAs of second-generation virtual worlds also contain provisions aimed at regulating users’ behavior on in-game marketplaces, e.g. by establishing rules against trade scams or other forms of abuse. Finally, EULAs and rules of conduct, respectively, of some virtual worlds contain provision regarding trade disputes between users and corresponding disclaimers of liability. The EULAs of emerging third-generation virtual worlds—most prominently Second Life—tend to establish a less restrictive ownership regime, i.e., recognizing that players have copyrights in their virtual creations whenever applicable. (The potential problems associated with such an approach have been discussed elsewhere.) In other respects, EULAs of third-generation worlds appear to be similar to governance regimes of second-generation virtual worlds.

8. A high-level analysis of selected EULAs and ToS’s of three generations of virtual worlds suggests that sophisticated regimes aimed at regulating digital transactions (in the broad sense of the term) have not yet emerged. It appears that EULAs and ToS of contemporary virtual worlds are eclectically dealing with questions of ownership/copyright, while paying less attention to the regulation of other important aspects of the marketplace—despite indication that some form of regulation might be (or become) necessary due to in-world market failures. Further, the analysis suggests that virtual world governance regimes, as far as they have developed and as far as transactions are concerned, are largely replicating traditional institutional arrangements of the offline world. In this regard, one can not yet observe large-scale experiments with alternative governance approaches to market regulation.

9. It remains an open question as to what extent those second-generation virtual worlds in which transactions and markets play an increasingly important role will need, over time, a more advanced approach to governance in order both to organize and protect markets. A more comprehensive framework would probably also include some form of contract law, consumer protection laws, and rules ensuring competition on virtual markets. Even more interesting is the question of whether currently available institutional frameworks—such as rules and enforcement arrangements as established by contract or corporate law, for instance—are appropriate to deal with the potential challenges that emerge in peer-produced third-generation virtual worlds. Further, current governance regimes as established, in part, by EULAs and ToS’s still have a strong vertical orientation, heavily focusing on the interactions and transactions between users and platform providers. Complementary “horizontal” and peer-oriented governance approaches, by contrast, have not gained much visibility, although precursors exist (e.g. in form of new digital institutions such as in-world laws drafted and enacted by users as in the case of A Tale in the Desert.)

10. The analysis of existing and emerging governance regimes—here focusing on transaction frameworks—suggests that we are only at the very beginning of the often quoted competition among governance regimes of virtual worlds. Whether competing governance systems also emerge between virtual worlds on the one hand and the real world on the other, depends increasingly on the creativity of virtual citizens in peer-designing their own innovative governance regimes as we move from centralized to decentralized virtual worlds.

Last week, the European Commission unveiled its strategy to make Europe’s written and audiovisual heritage available on the Internet. From the press release:

An update in English on the current revision of the Swiss Copyright Act is available here. It does not come as a surprise that the anti-circumvention provisions as well as the proposed levy on CD and DVD burners are contested. Note that iTunes – recently launched in Switzerland (see here and here) – is now used to call for thougher legal protection of DRM. I translated the draft anti-circumvention provisions here.

Find here a terrific report by the OECD on the digital music industry (pre-release.) The report includes, inter alia, references to Terry Fisher’s seminal book Promises to Keep as well as to the Berkman Center’s iTunes case study.

The report concludes that online music distribution will grow significantly over the next few years, will force the music industry to reconsider their business models, and will continue to pose regulatory challenges to governments. The study includes a detailed impact analysis of digital music distribution on artists, consumers, the record industry, and new intermediaries.

The OECD underlines the positive potential of digital distribution, both as a new business model and a cultural phenomenon. It’s report further concludes that Internet-based piracy may be reduced, if licensed file-sharing and new forms of superdistribution evolve.

The study, part of the OECD Project on Digital Broadband Content, is the outcome of work involving a wide range of stakeholders, including many governments. It’s among the first roadmaps exploring as to how public policy should be re-evaluated in this space.

The Berkman Center’s Digital Media Team was invited to comment on a draft version of this report. Today, we congratulate the study’s authors to a thorough multi-stakeholder analysis, written in a challenging environment.

Stay tuned.

Update: The OECD report is also featured in the latest edition of The Economist (subscription required.) See also WIRED News with reactions from IFPI.

Check out the program of the 5th Frankfurt Scientific Symposium, asking: “Is there any progress in alternative publishing? Problems of scholarly information economy.” The event takes place in Frankfurt on October 22 and 23, 2005. Impressive line-up of speakers. (Thanks to Sacha for the pointer.)

EDRI-gram provides an overview of the Declaration on Human Rights and the Rule of Law in the Information Society that has recently been adopted by the the Council of Europe’s Committee of Ministers (see also press release.) The author of the EDRI-gram report concludes:

Peter Jaszi has written and posted an interesting paper on Public Interest Exceptions in Copyright from a comparative and international perspective. He concludes that the “balance in copyright is threatened everywhere in the world, from the least developed countries to the major copyright exporting nations,” and suggests a research project aimed at drafting a best practice model for provisions on limitations and exceptions “that mix and match provisions from all the laws of the world.”